Microsoft Licensing Terminology
- License: Legal permission to use Microsoft software.
- SA (Software Assurance): Access to new versions and support.
- OEM (Original Equipment Manufacturer): Software bundled with hardware.
- Volume Licensing: Discounted software licenses for large organizations.
- CSP (Cloud Solution Provider): Partner selling Microsoft cloud services.
Microsoft Licensing Terminology
Microsoft licensing can be a daunting landscape for organizations to navigate. With various license types, models, and terminology, it’s unclear what each term means, how licenses are calculated, or how to ensure compliance.
Whether you are a business owner, IT professional, or procurement manager, understanding Microsoft’s licensing ecosystem is essential to ensuring your organization can legally use Microsoft products while effectively managing costs.
This comprehensive guide aims to demystify key Microsoft licensing terminology and provide insights into the various models, terms, and concepts crucial in Microsoft’s licensing structure.
Core Licensing Concepts
At its core, Microsoft licensing is about granting permission to use Microsoft’s software and services. A license is a legal agreement defining the terms under which an organization can use these products.
The key concept revolves around how an organization interacts with the software, the number of users or devices that will use it, and the overall scale of the deployment.
Access vs. Usage:
In Microsoft licensing, access refers to any interaction with Microsoft software or services, which includes actions such as reading, writing, or creating content.
If a user or device interacts with the software in any way, a license is typically required. A good rule of thumb is to assume that any interaction requires a license unless Microsoft explicitly states otherwise.
Primary Licensing Units
Microsoft uses four fundamental units of measure for calculating license requirements, each of which targets a specific usage scenario:
- Per-User Licensing: This model assigns a license to individual users, granting them the right to access Microsoft software on multiple devices. This is ideal for businesses where employees use various devices (e.g., desktops, laptops, tablets) but are the primary users of the software.
- Per-Device Licensing: Unlike per-user licensing, per-device licensing assigns a license to a specific device, regardless of how many users access it. This model suits shared devices like workstations or kiosks, where multiple people may use the same machine.
- Capacity-Based Licensing: This model is based on the system capacity (e.g., CPU, RAM, or other resources). It is typically used for larger infrastructure setups where the software must scale according to the available hardware capacity, such as in server or cloud environments.
- Consumption-Based Licensing: In this model, charges are based on the actual usage of resources. Cloud services like Azure and Microsoft 365 often use consumption-based pricing, where costs are tied to the amount of data or resources consumed by the organization.
Read about common myths in Microsoft licensing.
License Types
Understanding the different license types available under Microsoft’s licensing programs is crucial for selecting the most cost-effective and appropriate option for your organization.
- Volume Licensing: Volume licensing is designed for businesses and organizations purchasing multiple employee licenses. This model offers several benefits, including:
- Cost savings through bulk purchasing
- Simplified license management under a single agreement
- Flexible pricing and custom discounts
- Regular compliance checks to ensure all licenses are used correctly
- Retail Licensing: Retail licenses are individual licenses typically sold for personal use or small-scale implementations. These licenses usually come with standard terms and provide limited flexibility compared to volume licensing agreements.
- OEM Licensing: Original Equipment Manufacturer (OEM) licenses come pre-installed on hardware and are tied to the specific device they are installed on. These licenses cannot typically be transferred to a different device.
- Subscription Models: Microsoft’s subscription programs provide ongoing access to software and services under a recurring cost model. Examples include:
- Microsoft Online Subscription Program (MOSP): This cloud-based program offers monthly or annual subscription options with flexible scaling and access to cloud-based products like Office 365 and Azure.
Client Access Licenses (CALs)
A critical component of Microsoft’s server licensing model, Client Access Licenses (CALs) are required to legally access
Microsoft server software. CALs are purchased separately from the server software and come in two types:
- User CALs: These licenses are assigned to individual users, allowing them to access the server from any device.
- Device CALs: Device CALs are assigned to specific devices, allowing users to access the server from that device.
Special Licensing Scenarios
There are several unique licensing scenarios that organizations need to be aware of:
- BYOD (Bring Your Own Device): BYOD allows employees to use their devices for work purposes. However, this practice requires careful software usage and compliance management to ensure that appropriate licenses are in place.
- BYOL (Bring Your Own License): With BYOL, organizations can transfer existing software licenses to new deployments, typically in cloud environments. This scenario often requires Software Assurance, which provides additional benefits such as the right to move licenses between on-premise and cloud environments.
Compliance and Management
Proper licensing compliance is essential for any organization to avoid penalties and ensure the legal use of Microsoft products. Non-compliance can lead to significant fines, audits, and reputational damage. Microsoft offers several ways to manage and track licensing compliance:
- Internal Compliance Audit: Regular internal audits help organizations monitor license usage and adhere to Microsoft’s terms and conditions. This process helps identify areas of non-compliance and potential issues.
- Multiplexing: Multiplexing refers to hardware or software that pools connections or reroutes information, typically used in server environments. However, multiplexing does not reduce the need for individual user licenses. Each end user still requires the appropriate licensing, even if their connections are routed through multiplexing devices.
Server Licensing Models
Microsoft offers several server licensing options, each tailored to specific use cases. Below are some common licensing models:
- Windows Server Licensing: Windows Server licenses typically use core-based licensing, where licenses are based on the number of physical cores in the server. Organizations must also purchase Client Access Licenses (CALs) for each user or device accessing the server. Special licenses, such as Remote Desktop Services (RDS), may be required for terminal server scenarios where users access the server remotely.
- SQL Server Licensing: SQL Server offers multiple licensing models, including:
- Core Licensing: Based on the number of CPU cores in the SQL server Server.
- Server + User CAL: A combined model where organizations purchase server and user CALs to access the SQL Server.
- SPLA Licensing: The Service Provider License Agreement (SPLA) offers a subscription-based model for service providers, allowing monthly licensing of SQL Server.
- Azure SQL Server: This cloud-based solution with integrated licensing provides scalability and flexibility for cloud environments.
Modern Licensing Programs
As Microsoft transitions to a cloud-first strategy, it has introduced several modern licensing programs to streamline software acquisition and management.
- Microsoft Customer Agreement (MCA): The MCA establishes the relationship between Microsoft and customers who acquire software through Cloud Solution Providers (CSPs). It simplifies the licensing process and allows for more flexible licensing purchases and management through Microsoft’s cloud marketplace.
- Enterprise Agreements: Designed for large organizations, Enterprise Agreements provide comprehensive licensing solutions that include:
- Standardized pricing
- Software Assurance benefits (e.g., upgrade rights and technical support)
- Flexible payment options and regular upgrade rights keep organizations updated with the latest versions.
Software Assurance Benefits
Software Assurance (SA) is an optional maintenance offering that provides organizations with a wide range of benefits.
These benefits include:
- Upgrade rights to new versions of Microsoft software as they are released.
- Technical support for resolving issues with software deployment and usage.
- Training vouchers for employee development.
- Home use rights allow employees to use Microsoft software on their devices.
- Deployment planning services to assist with the installation and configuration of software.
Cloud Service Licensing
With the rapid shift toward cloud computing, Microsoft has developed specific licensing models for its cloud-based services:
- Microsoft 365 Licensing: Microsoft 365 is a subscription-based service that provides access to cloud-based applications like Office 365, Teams, and OneDrive. The licensing model typically includes:
- Up to five installations per user.
- Access to the latest version of Microsoft Office.
- Cloud services access, including collaboration and storage solutions.
- Azure Licensing: Microsoft Azure offers a variety of pricing models, including:
- Consumption-based pricing: Charges based on actual resource consumption, such as storage or computing power.
- Reserved instances: Discounts for committing to long-term use of specific Azure services.
- Hybrid benefits: Discounts for customers with on-premise licenses who want to move their workloads to the cloud.
- Pay-as-you-go: Flexible pricing based on actual usage without upfront costs.
Licensing Compliance
Maintaining proper licensing compliance is crucial to avoid fines and penalties. Organizations should regularly audit their software usage, maintain accurate license records, and use license management tools to streamline compliance.
Key Steps to Achieving Compliance:
- Regular auditing of software usage.
- Maintaining accurate records of purchased licenses and installed software.
- Understanding license terms and conditions ensures software is used according to Microsoft’s policies.
- Using license management tools to track and optimize license usage.
Read about how to choose the right Microsoft licensing agreement.
FAQ: Microsoft Licensing Terminology Explained
What is Volume Licensing?
It allows businesses to buy licenses in bulk for better management and cost savings.
What does a Client Access License (CAL) mean?
CAL grants users or devices permission to access Microsoft server software.
What is Software Assurance (SA)?
It’s an add-on for updates, support, and other benefits during the license term.
How do OEM licenses work?
OEM licenses are tied to specific hardware and cannot be transferred to other devices.
What is a Per-User vs. Per-Device license?
Per-user licenses are for individual users across multiple devices; per-device licenses cover specific devices.
What is the difference between perpetual and subscription licenses?
Perpetual licenses are one-time purchases; subscription licenses require ongoing payments.
What is BYOD in Microsoft Licensing?
BYOD supports licensing personal devices used for work purposes.
What is an Enterprise Agreement (EA)?
EA is a contract for large organizations offering flexibility and discounts on volume licensing.
What is the EULA (End-User License Agreement)?
It outlines the legal rights and restrictions of software use.
How does CSP (Cloud Solution Provider) licensing work?
CSP allows businesses to purchase and manage cloud-based services through resellers.
What is an Open License?
It’s a simple and flexible volume licensing option for small to medium businesses.
What does a True-Up mean in Microsoft Licensing?
It’s an annual process to account for license changes during the agreement.
What is an Add-on License?
These are licenses added to an existing agreement to expand functionality or services.
What are License Mobility rights?
They allow you to move licenses across servers, which is particularly useful for cloud environments.
How is licensing managed in hybrid environments?
Microsoft offers flexible models to license both on-premises and cloud environments under the same agreement.
